Blockchain was born at the peak of the 2008 financial crisis when an anonymous person or a group of individuals using the name Satoshi Nakamoto drafted a paper creating a protocol for a digital cryptocurrency called Bitcoin and subsequently mined the first block of bitcoins, known
as the ‘genesis block’. This was born out of a need for people to establish
trust and do transactions without a third party. Another popular blockchain, Ethereum, was developed by a Canadian named Vitalik Buterin in July 2015, when he created its genesis block.
Ethereum introduced various new capabilities, one of which was the ability to build smart contracts – computer protocols that verify or enforce contracts. A smart contract is a self-executing agreement that handles all the stages of a contract, including the management, enforcement, performance and payment.
To describe the technology in simple terms, the blockchain is a digitized,
decentralized, tamper-proof ledger platform that records and verifies transactions and cuts out the middlemen.
The financial services sector was the first to realize its game-changing potential, particularly in the way it could reduce costs, make processes more efficient and support a lot of their operations. Banks often term blockchain ‘distributed ledger technology’ (DLT) to distinguish it from Bitcoin’s blockchain.
They were drawn to DTL because of the following attractive features, as
laid out in The Fintech 2.0 Paper, a 2015 report from Santander InnoVentures produced in collaboration with Oliver Wyman and Anthemis Group, also widely regarded as the first comprehensive declaration of the blockchain promise for enterprises:
- Transactions can be made to be irrevocable, and clearing and settlement can be programmed to be near-instantaneous, allowing distributed ledger operators to increase the accuracy of trade data and reduce settlement risk.
- Systems operate on a peer-to-peer basis and transactions are near-certain to be correctly executed, allowing distributed ledger operators to eliminate supervision and IT infrastructure, and their associated costs.
- Each transaction in the ledger is openly verified by a community of networked users rather than by a central authority, making the distributed ledger tamper-resistant; and each transaction is automatically administered in such a way as to render the transaction history difficult to reverse.
- Almost any intangible document or asset can be expressed in code, which can be programmed into or referenced by a distributed ledger
- A publicly accessible historical record of all transactions is created, enabling effective monitoring and auditing by participants, supervisors and regulators.
The last three years in particular have witnessed an intensified race among companies across industries and geographies to deploy blockchain to transform their supply chains.
Globally, organizations have been taking advantage of blockchain technology to improve traceability in their supply chains.
In December 2017 Unilever launched a one-year pilot project that leveraged blockchain technology to track supply chains for tea sold by the consumer goods giant and the British supermarket Sainsbury’s. The company partnered with big banks and technology start-ups to track tea farmers in Malawi, who supply tea for Unilever brands. The project used technology to maintain transparency on the supply chain, so both the company and the consumer knew the origins of their tea. ‘Malawian tea is the start, not the end,’ said Andrew Voysey, Director of Sustainable Finance at the University of Cambridge Institute for Sustainability Leadership at the project launch.
Up to 10,000 farmers in Malawi were eligible to join the pilot, which aimed to reward those who produced a fairer, more sustainable brew, with financial incentives such as preferential loans and access to credit.
Consumer goods and retail companies are facing increasing pressure to find better ways to certify that their supply chains are environmentally sustainable and free from worker-rights abuse and corruption.
Coca-Cola Co and the US State Department, along with two other companies, announced in March 2017 that they were launching a project using blockchain’s digital ledger technology to create a secure registry for workers that would help fight the use of forced labour worldwide. The Bitfury Group, a US tech company, built the blockchain platform for this project, while Emercoin provided blockchain services.
In late 2017 a group of 10 large food and retail companies, including
Nestlé, Unilever, and Tyson Foods joined an IBM project to study how
blockchain systems can help track food supply chains and improve safety.
Here’s how Walmart, on its own, intends to use blockchain to improve
food safety across its complex global food supply chain. Frank Yiannas,
Walmart Vice President of Food Safety and Health, revealed to an audience
at an MIT Technology Review Business of Blockchain conference in
Cambridge, Massachusetts that blockchain was able to shorten the time it took to track produce from six days to two seconds. Walmart was recently
awarded a patent for a system that would store medical records on a blockchain from a medical device. Walmart has also filed a patent for a
blockchain-based customer marketplace for reselling its goods.
The shipping industry has joined the race with a flourish. In August 2018 IBM and Maersk launched a blockchain-based shipping platform, TradeLens, with 94 early adopters that include more than 20 port and terminal operators.
TradeLens’ permission-driven blockchain ledger will allow all the
participants to view real-time details of cargo shipments, such as shipment
arrival times, customs releases, commercial invoices and bills of lading.
TradeLens can track critical data about every shipment in a supply chain
and create immutable records for all the participants.
TradeLens is not the only player in the fray. Tradeshift, a supply chain
payments and marketplaces startup valued at over $1 billion, recently reported a 350 per cent increase in gross merchandise volume on Tradeshift’s platform compared with the previous year and a 315 per cent year-over-year rise in new bookings. Tradeshift also earned the distinction of being the first platform to incorporate supply chain payments, finance and blockchain-based early payments all into one unified solution. Currently, the Tradeshift platform can integrate with both Ripple blockchain payments and R3’s Corda.
Worldwide spending on blockchain solutions is on a rise. IDC estimated
that blockchain spending would reach $2.1 billion in 2018, more than double the $945 million spent in 2017. The study said that the United States
would see the largest blockchain investments and deliver more than 40 per
cent of worldwide spending. Western Europe will be the next largest region
for blockchain spending, followed by China.
In August 2018 the USC Marshall Centre for Global Supply Chain
Management brought together industry leaders, tech investors and innovators at its Sixth Annual Global Supply Chain Summit to launch IBISK, an initiative with an aim to partner and collaborate with governments and multinational companies to drive the future best practices and standards for the adoption of blockchain.
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